Shukul Chand Jain,, Delhi v. ITO, New Delhi

ITA 2884/DEL/2010 | 2007-2008
Pronouncement Date: 29-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 288420114 RSA 2010
Assessee PAN ACWPC1776H
Bench Delhi
Appeal Number ITA 2884/DEL/2010
Duration Of Justice 1 year(s) 8 month(s) 19 day(s)
Appellant Shukul Chand Jain,, Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-02-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 29-02-2012
Date Of Final Hearing 24-01-2012
Next Hearing Date 24-01-2012
Assessment Year 2007-2008
Appeal Filed On 09-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI SHAMIM YAHYA ITA NO. 2884/DEL/2010 ASSESSMENT YEAR: 2007-08 SHUKUL CHAND JAIN VS. INCOME-TAX OFFICER 9103/2 MULTANI DHANDA WARD 39(4) PAHAR GANJ NEW DELHI. NEW DELHI-1100 55 (PAN: ACWPC1776H) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RS ADLAKHA ADV. RESPONDENT BY: SMT. S. MOHANTHY SR.DR DATE OF HEARING : 24.01.2012 DATE OF PRONOUNCEMENT : 29 .02.2012 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LEARNED CIT(APPEALS) DATED 01.03.2010 PASSED FOR ASSESSMENT YEAR 2007-08. THE GROUND NO.1 IS GENERAL IN NATURE THEREFORE LEARNE D COUNSEL FOR THE ASSESSEE DID NOT ADVANCE ANY ARGUMENT HENCE IT IS REJECTED . 2. IN GROUND NO.2 ASSESSEE IS IMPUGNING CONFIRMATI ON OF AN ADDITION OF RS. 3 LACS ON ACCOUNT OF UNEXPLAINED CASH CREDITS F OUND IN HIS BOOKS OF ACCOUNT. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE AT THE RELEVANT TIME WAS TRADING IN ALUMINUM. HE HAS FILED HIS RETURN OF INC OME ON 12.9.2007 2 DECLARING AN INCOME OF RS.2 48 189. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143 (2) OF THE INCOME-TAX ACT 1961 WAS ISSUED ON 26.9.2008 WHICH WAS DULY SE RVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE HAS TAKEN A LOAN OF RS.3 30 000 FROM TWO LADIES NAMELY SMT. SHALINI JAIN AND SMT. ASHU JAIN AMOUNTING TO RS.1 5 0 000 AND RS.1 80 000 RESPECTIVELY. ON PERUSAL OF THE BANKS STATEMENTS IT REVEALED THAT THE LOAN WAS TAKEN THROUGH ACCOUNT PAYEE CHEQUES ON 8.8.2006 . HOWEVER ON THAT VERY DAY A SUM OF RS.1 50 000 WAS DEPOSITED IN THE ACCOUNTS OF BOTH THE LADIES. THE ASSESSING OFFICER DIRECTED THE ASSESSEE TO PROVE IDENTITIES OF THE LADIES GENUINENESS OF THE TRANSACTION AND THEIR CR EDITWORTHINESS. THE ASSESSEE HAS CONTENDED THAT LOAN WAS TAKEN THROUGH ACCOUNT PAYEE CHEQUES BOTH THE LADIES ARE INCOME-TAX ASSESSEES. HE DISCLO SED THEIR INCOME-TAX PARTICULARS. HE ALSO FILED CONFIRMATION FROM BOTH T HE LADIES. THE ASSESSEE FURTHER CONTENDED THAT BOTH THE LADIES ARE DOING BU SINESS. THEY ARE FILING REGULAR RETURNS AND THEY WERE HAVING CASH BALANCE O UT WHICH THESE AMOUNTS HAVE BEEN DEPOSITED IN THE BANK FROM WHERE CHEQUES WERE ISSUED TO THE ASSESSEE. ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. HE DOUBTED THE CREDITWORTHINESS OF BOTH T HE LADIES AND MADE AN ADDITION OF RS. 3 LACS. 3 4. DISSATISFIED WITH THE ADDITION ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS). THE FACTS NARRATED WITH REGARD TO BUSINESS OF BOTH THE LADIES AND THE STATUS OF FILING OF INCO ME-TAX RETURNS HAVE BEEN NOTED BY THE LEARNED CIT(APPEALS) IN PARAGRAPH NO.3 .3 IN ORDER TO APPRECIATE THE CONTROVERSY IN RIGHT PERSPECTIVE. WE DEEM IT APPROPRIATE TO NOTE THESE DETAILS WHICH ARE AS UNDER: I. SMT. SHALINI JAIN FILED HER FIRST RETURN IN A.Y. 20 02-03 SHOWING INCOME OF RS.65 340/- FROM SALE OF GARMENTS ETC. TOTAL SALES ARE SHOWN AT RS.2 45 780/- YIELDING A NET PROFIT RATE OF 27%. TAX PAYABLE HAS BEEN WORKED OUT AT RS.NIL. II. IN A.Y. 2003-04 HER RETURN HAS BEEN FILED SHOWING AN INCOME OF RS41 560/- FROM SALE OF GARMENTS ETC. AMOUNTING TO RS.1 89 860 J-. THE NET PROFIT RATE WORKS OUT TO 22%. APART FROM THIS INCOME FROM COMM ISSION AMOUNTING TO RS.50 986/- IS SHOWN. AFTER ADJUSTING TDS OF RS.2 6 77/- REFUND OF RS.42/-HAS BEEN CLAIMED. A LOAN OF RS.85 000J - HAS BEEN GIVEN TO THE APPELLANT'S PROPRIETOR SHIP CONCERN M/S VEERA ALUMINIUM. III. IN A.Y.2004-05 NET PROFIT OF 82 955/- HAS BEEN SHO WN ON SALE OF RS4 90 780/- .THE NET PROFIT RATE WORKS BOUT TO 17%. TAX AMOUNTI NG TO RS.590/- HAS BEEN PAID. IV. IN A.Y.2005-06 NET PROFIT RATE OF RS.1 05 520/- H AS BEEN SHOWN ON SALE OF RS.4 12 340/- YIELDING A N.P. RATE OF 26%. TAX AMOU NTING TO RS.530/- HAS BEEN PAID. V. IN A.Y. 2006-07 NET PROFIT OF RS.L 43 220/- HAS BE EN SHOWN ON SALES OF RS.7 34 900/- U/S 44AF. TAX AMOUNTING TO RS.319J- H AS BEEN PAID. 4 3.4 THE POSITION REGARDING SMT. ASHU JAIN IS AS FOLLOWS: I. SMT. ASHU JAIN FILED HER FIRST RETURN IN A.Y. 20 02-03 SHOWING PROFIT OF RS49 156/- FROM SALE OF GARMENTS ETC. TOTAL SALES A RE SHOWN AT RS.2 45 780/- YIELDING A NET PROFIT RATE OF 27%. INCOME OF RS.29 164/- IS SHOWN FROM INTEREST. TAX PAYABLE HAS BEEN WORKED OUT AT RS.NIL . II. IN A.Y. 2003-04 HER RETURN HAS BEEN FILED SHOW ING A PROFIT OF RS.27 160/- FROM SALE OF GARMENTS ETC. AMOUNTING TO RS.1 45 680 /-. THE NET PROFIT RATE WORKS OUT TO 19%. APART FROM THIS INCOME FROM COMM ISSION AMOUNTING TO RS.68 839/- IS SHOWN. AFTER ADJUSTING TDS OF RS.3 6 L4/- REFUND OF RS.254/-HAS BEEN CLAIMED. A LOAN OF RS.45 000 / - HAS BEEN GIVE N TO THE APPELLANT'S PROPRIETOR SHIP CONCERN M/S. VEERA ALUMINIUM. III. IN A.Y. 2004-05 NET PROFIT OF 48 004 HAS BEE N SHOWN ON SALE OF S.3 70 780/-. THE NET PROFIT RATE WORKS OUT TO 17%. TAX PAID IS NIL. A FURTHER LOAN OF RS. 70 000 HAS BEEN GIVEN TO THE APPELLANT 'S PROPRIETOR SHIP CONCERN MF S VEERA ALUMINIUM. IV. IN A.Y. 2005-06 NET PROFIT OF RS.1 05 260/- HA S BEEN SHOWN ON SALE OF RS.4 25 070/- YIELDING A N.P. RATE OF 25%. TAX AMOU NTING TO RS.265/- HAS BEEN PAID. V. IN A.Y. 2006-07 NET PROFIT OF RS.1 42 690/- HAS BEEN SHOWN ON SALES OF RS.9 40 090/- U/S 44AF. TAX AMOUNTING TO RS.290/- H AS BEEN PAID. 5. LEARNED FIRST APPELLATE AUTHORITY ON AN ANALYSIS OF THESE DETAILS INFERRED FOLLOWING CONCLUSIONS: (I) RETURNS HAVE BEEN FILED IN THE NAMES OF BOTH T HE LADY FAMILY MEMBERS SHOWING INCOME JUST ABOVE THE TAXABLE LIMIT. THE IN CREASE IN INCOME SHOWN HAS 5 BEEN SYNCHRONIZED WITH THE INCREASE IN THE TAXABLE LIMIT SO THAT NO TAX OR ONLY NOMINAL TAX IS PAID. (II) THE NET PROFIT RATE SHOWN OF AROUND 25% IS EX TRAORDINARILY HIGH AND IS EVEN MORE EXTRAORDINARY CONSIDERING THAT THE APPE LLANT HAS HIMSELF DECLARED A GROSS PROFIT RATE OF ONLY 2.23%. (III) THERE IS NO EVIDENCE REGARDING ANY ACTUAL B USINESS DONE BY THESE LADIES. (IV) THE SAME PATTERN IS REPEATED YEAR AFTER YEAR FOR BOTH THE LADIES. THEIR INCOME TAX RETURNS SHOW REMARKABLE SIMILARITY. THE INCOME IS SHOWN-TO INCREASES IN THE SAME MANNER.. THEIR SALE SHOWN IS ABOUT THE SAME. THIS IS TOO MUCH OF A COINCIDENCE TO BE TRUE. (V) THE ENTIRE FUNDS GENERATED IN THIS MANNER ARE SHOWN TO BE INVESTED IN THE APPELLANT'S PROPRIETORSHIP CONCERN. 6. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE EMPHASIS OF THE LEARNED DR IS THAT BOTH THE LADIES ARE THE FAMILY MEMBERS OF THE ASSESSEE. IN FACT TH EY ARE NOT DOING ANY BUSINESS RATHER IN ORDER TO BUILT UP CAPITAL THEY ARE FILING RETURNS ON THE BEHEST OF ASSESSEE. SHE POINTED OUT THE FINDINGS RE CORDED BY THE LEARNED CIT(APPEALS) IN PARAGRAPH NO.3.6 ON THE STRENGTH OF HON'BLE SUPREME COURTS DECISION IN THE CASE OF SUMATI DAYAL VS. CI T REPORTED IN 214 ITR 801. ON THE OTHER HAND THE CONTENTIONS OF THE LEAR NED COUNSEL FOR THE ASSESSEE IS THAT WHAT IS THE EVIDENCE POSSESSED BY THE REVENUE FOR HARBORING SUCH A BELIEF. ON AN ANALYSIS OF THE MATERIAL WE F IND THAT NEITHER THE LEARNED ASSESSING OFFICER NOR LEARNED CIT(APPEALS) HAS RECO RDED THE STATEMENTS OF 6 BOTH THE LADIES. THEY ARE REGULAR FILING THEIR INCO ME-TAX RETURNS AND THOSE RETURNS WERE ACCEPTED BY THE REVENUE. ON WHAT BASIS IT CAN BE SAID THAT THESE RETURNS ARE JUST ON PAPER AND THEY WERE NOT DOING A NY BUSINESS. LEARNED CIT(APPEALS) WHILE DISBELIEVING THE BUSINESS ACTIV ITIES CARRIED OUT BY THOSE LADIES HAS ASSIGNED THE REASONS THAT NET PROFIT RAT E SHOWN BY THEM IS AROUND 25% IN SOME OF THE YEARS WHICH IS EXTRA-ORDINARILY HIGH MORE SO IT IS HIGHER THAN THE G.P. SHOWN BY THE ASSESSEE. TO OUR MIND S UCH AN INSTANCE CANNOT BE SUFFICIENT TO DOUBT THE STATEMENT OF FACTS MADE BY ANY PERSON. IF THE REVENUE AUTHORITIES HAD ANY DOUBT THEN ASSESSING OFFICER OU GHT TO HAVE RECORDED STATEMENTS OF BOTH THE LADIES. HE COULD FIND OUT FR OM WHERE THEY HAVE MADE PURCHASES TO WHOM THEY HAVE MADE SALES AND HOW THE Y WERE DOING THE BUSINESS. NO DOUBT SURROUNDING CIRCUMSTANCES CAN B E LOOKED INTO BUT THEY SHOULD BE CONNECTED WITH THE ISSUE IN DISPUTE AND S HOULD HAVE SOME BEARING. THE INFERENCES DRAWN BY THE LEARNED FIRST APPELLATE AUTHORITY EXTRACTED SUPRA ARE NOT BASED ON ANY MATERIAL. THE SECOND CIR CUMSTANCE IS THAT WHETHER CASH WAS AVAILABLE WITH THE CREDITOR OR NOT . IN THIS CONNECTION ALSO WE HAVE TO WEIGH THE TOTALITY OF THE CIRCUMSTANCES. THE ASSESSEE HAS POINTED OUT THAT BOTH THE LADIES ARE INCOME-TAX ASSESSEES. THEY ARE PREPARING THEIR BALANCE SHEET THEY ARE HAVING CASH BALANCE ASSESS EE HAS TAKEN LOAN THROUGH ACCOUNT PAYEE CHEQUES THEY HAVE GIVEN CONFIRMATION IN SUPPORT OF 7 ADVANCEMENT OF LOAN. IN SUCH CIRCUMSTANCES THE REA SONING ASSIGNED BY THE ASSESSING OFFICER IS LITTLE FRAGILE TO DOUBT THEIR CREDITWORTHINESS. THEIR IDENTITY IS NOT IN DISPUTE BECAUSE THEY ARE FAMILY MEMBERS OF THE ASSESSEE. SIMILARLY GENUINENESS OF THE TRANSACTION IS NOT IN DISPUTE LOANS HAVE BEEN GIVEN THROUGH ACCOUNT PAYEE CHEQUES. TAKING INTO CO NSIDERATION ALL THESE FACTS AND CIRCUMSTANCES WE ARE OF THE OPINION THAT ASSESSEE HAS DISCHARGED THE ONUS CONTEMPLATED UNDER SEC. 68 AND ADDITION OF RS. 3 LACS DESERVES NOT TO BE UPHELD IN HIS HANDS. ACCORDINGLY WE ALLOW GR OUND NO.2 AND DELETE THE ADDITION. 7. GROUND NOS. 3 & 4 ARE INTER-CONNECTED. IN THESE GROUNDS OF APPEAL ASSESSEE IS IMPUGNING AD HOC DISALLOWANCE OUT OF CA R EXPENSES TELEPHONE EXPENSES ETC. THE FINDINGS OF THE LEARNED ASSESSING OFFICER ON THIS ISSUE READ AS UNDER: THE ASSESSEE HAS CLAIMED VEHICLE EXPENSES OF RS.1 11 837 INSURANCE AT RS.34046 AND CAR DEPRECIATION AT RS.10 3 811 TOTALLING TO RS.2 49 694 OUT OF WHICH 1/6 TH WHICH COMES TO RS.41 615 IS DISALLOWED BEING THE ELEMENT OF PERSONAL USE OF CAR BY PROP. CANNOT BE RULED OUT MOREOVER THE ASSESSEE IS NOT MAINTAIN ING ANY LOG BOOKS SHOWING THE SEPARATE USE OF VEHICLE. THE ASSESSEE HAS CLAIMED TELEPHONE EXPENSES AT RS.1 03177 PERTAINING TO TELEPHONE INSTALLED AT OFFICE AND RES IDENCE OF THE ASSESSEE. SINCE NO CALL REGISTER HAS BEEN MAINTAINE D BY THE ASSESSEE 8 THAT HOW MUCH CALLS HAVE BEEN MADE FOR BUSINESS PUR POSES AND HOW MUCH CALLED HAVE BEEN FOR PERSONAL USE. IN THE ABSE NCE OF SAME AND CONSIDERING THE FACT THAT THE ELEMENT OF PERSONAL U SE OF TELEPHONE CANNOT BE RULED OUT AND A SUM OF RS.17 196 BEING 1/ 6 TH OF TELEPHONE EXPENSES ARE DISALLOWED FOR PERSONAL ELEMENTS. DISALLOWANCE RS.17 196/- 8. APPEAL TO THE LEARNED CIT(APPEALS) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 9. DURING THE COURSE OF HEARING WE CONFRONTED THE LEARNED COUNSEL FOR THE ASSESSEE TO SHOW IF ANY LOG BOOK IN RESPECT OF CAR BEING RUN FOR THE PURPOSE OF BUSINESS MAINTAINED. SIMILARLY WHETHER ASSESSEE HAS MAINTAINED ANY CALL REGISTER DEMONSTRATING THAT TELEPHONE WAS EXCLUSIVELY USED FOR THE PURPOSE OF BUSINESS. LEARNED COUNSEL FOR THE ASSESS EE WAS UNABLE TO EXPLAIN THIS QUERY. HE ONLY SUBMITTED THAT THE DISALLOWANCE IS ON THE HIGHER SIDE. ON DUE CONSIDERATION OF HIS SUBMISSIONS AND THE FINDIN GS OF THE LEARNED TWO AUTHORITIES BELOW WE DO NOT WISH TO INTERFERE IN T HE DISCRETION EXERCISED BY THEM FOR ESTIMATING THE AD HOC DISALLOWANCE. BOTH T HESE GROUNDS OF APPEAL ARE REJECTED. 10. IN GROUND NO.5 GRIEVANCE OF ASSESSEE IS THAT L EARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS.5250. TH E LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS MADE DONATION TO AN INSTITUTION WHICH IS 9 ENJOYING REGISTRATION UNDER SEC. 80-G BUT ASSESSEE FAILED TO SUBMIT THE RECEIPT AND THE CERTIFICATE EXHIBITING THAT THIS IN STITUTION WAS ENJOYING 80G BENEFIT. THE RECEIPT HAS BEEN PLACED ON PAGE 57 OF THE PAPER BOOK. AFTER CONSIDERING THE EVIDENCE SUBMITTED ON THE RECORD W E REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AND READJUDICATION. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 29.02.2012 SD/- SD/- ( SHAMIM YAHYA ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29/02/2012 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR